Banking Chatbots 101: Benefits, Use Cases, and Statistics

Banking Chatbots 101: Example Baking Customer Experience

Banking chatbots are on track to save banks 826 million hours and $7.3 billion by next year. They’re helping banks stay relevant, meet rising expectations, and offer a better customer experience. In this article, we’ll go over everything you need to know about banking chatbots: what they are, why they matter, and what the future holds. 

What are banking chatbots?

Banking chatbots are software applications that conduct online chat conversations via text, in lieu of providing direct contact with a live human agent. They use predefined conversation flows, natural language processing, and/or machine learning to interpret customer requests.

While banking chatbots are designed to automate customer conversations, they also complement their human counterparts. They can automate parts of the conversation and hand it off to a human agent if necessary. 

Banking chatbots have evolved greatly over the past few years. Chatbot technology has improved, and so have the rules that govern them. Open banking initiatives have made it easier for banks to innovate and collaborate with chatbot service providers. As a result, chatbots in the banking sector are becoming even more intelligent. 

The focus on improving the banking customer experience has also put chatbots in the spotlight. Banks are finding that chatbots are necessary to scale great customer service. They allow banks to offer the immediacy, convenience, and personalization that their customers expect.

How are chatbots changing banking and financial services?

Chatbots are helping the banking and financial services industries get more conversational. In fact, chatbots are part of a broader shift in the way banks and customers interact. This concept is called conversational banking, and it has massive implications for banks and financial institutions. 

In essence, conversational banking means communicating with a chatbot about finances, bank balances, loan options, spending habits, and more. It allows the customer to ask questions just as they would in a real-world face-to-face exchange with a teller. 

Conversational commerce puts the customers’ needs at the center, rather than forcing them to learn the bank’s terminology or navigate unfamiliar software interfaces. It adds speed, accuracy, transparency, and clarity. These are critical elements of a good banking customer experience.

Why are banking chatbots important now? 

Banking chatbots are more important than ever. They play an integral role in helping banks meet rising customer expectations. Modern customers are ready and willing to embrace them.

Customers expect more from their banking experience

Customer expectations are rising. People aren’t just comparing banks to other banks. They’re comparing their banking experiences to the services that Netflix, Spotify, Amazon, and Uber provide.

This has to do with what marketers call “liquid expectations,” when customer experiences seep over from one industry to an entirely different industry. For example, customers compare the way their credit card application process was handled against their most recent Amazon return, and compare their airline check-in to that of their last Airbnb. 

As a result, customers are choosing financial service providers that can offer hyper-convenience, which can be categorized into four key themes:

  • What they want
  • When they want it
  • How they want it
  • Where they want it

Banks will have to adapt if they want to remain relevant. Banking chatbots help deliver the level of convenience that customers expect. 

People are ready and willing to embrace chatbots

Chatbots are no longer a novelty. In the past, chatbot experiences were limited and could easily lead to frustration. But, technology has evolved so much since then. 

Today, 87% of consumers report having a neutral or positive customer experience with chatbots. Only 13% report a negative customer experience. In fact, banks now use chatbots to increase their net promoter scores and reduce customer churn. 

What’s more, after having a positive experience with a chatbot, 72% of users placed higher trust in the company, 71% shared positive feedback with their close ones, and 64% gave the business high ratings or shared positive feedback on social media. 

Benefits of banking chatbots

Banking chatbots save time and money while improving the user experience. They also help banks meet key performance indicators. 

Banking chatbots save time

Banking chatbots automate conversations, freeing up human agents for higher-value work. Customers get immediate answers to simple questions, and more human resources are available when it matters most. 

According to Juniper Research, banks will save 826 million hours through chatbot interactions in 2023. The same research firm also predicts that bots can save banks 4 minutes per inquiry, or a cost savings of $0.50-0.70 per inquiry.

Banking chatbots save money

It’s no surprise that efficiency and cost savings go hand in hand. According to Juniper Research, chatbots will save banks up to $7.3 billion worldwide by 2023. Research author Nick Maynard explains: 

“Chatbots in banking allow heavily automated customer service, in a highly scalable way. This type of deployment can be crucial in digital transformation, allowing established banks to better compete with challenger banks.”

Banking chatbots improve the user experience

Banking chatbots add speed, convenience, personalization, and context to customer experiences. They help banks meet customers how, when, and where customers want to be met. 

For example, some of the best banking chatbots can be found on WhatsApp, Facebook Messenger, and other messaging channels. Others are improving the user experience within mobile banking apps.  

And, improving the customer experience directly impacts profit. A one-point increase in a CX index score can help traditional retail banks earn an additional $144 million in annual revenue.

Banking chatbots help banks meet their KPIs

Lastly, banking chatbots help banks improve their key performance indicators. These include metrics such as: 

  • Time to resolution
  • Customer churn
  • Customer acquisition costs
  • Customer loyalty
  • Organizational efficiency
  • Customer engagement

The top 5 use cases for chatbots in banking

Below are the top five examples of how institutions can use banking chatbots to gain a competitive edge. 

1. Automate FAQs 

Help customers check bank balances, find ATMs, check interest rates, and much more. Answer questions about credit or loan applications and get customers the information they need, exactly when they need it. On average, banks that use Hubtype automate 80% of their total inquiries.

2. Meet and track SLAs (service level agreements)

Exceed performance standards with intelligent automation. Decrease first response times (FRTs) and escalate conversations to human agents if needed. 

3. Turn transactions into relationships

Automate questions about bonus points, recurring payments, expenses, and transfer limits. Turn simple transactions into convenient, memorable experiences. When customers are consistently delighted with a bank's services, they are more likely to recommend it to family and friends. 

4. Send reminders and notifications 

Give your customers peace of mind with reminders about payment deadlines and financial processes. Notify customers about changes in credit scores or relevant news. 

5. Solve urgent issues fast

Offer immediate help when it matters most. Send notifications about suspicious charges and help customers take immediate action.

There are many potential use cases for chatbots in banking beyond these five. Contact us to discuss your potential banking chatbot use case.

The future of chatbots in banking

The future of chatbots in banking is bright. Chatbots in the banking sector will continue to evolve and demonstrate a proven record of seamless service delivery, which will drive adoption by initially skeptical financial institutions.

As a result, we’ll see a growth of nearly 3,150% in successful banking chatbot interactions between 2019 and 2023. They will continue to boost revenue and lower costs, and will no longer be a competitive advantage but rather a critical tool for survival.